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Janet Yellen put up a robust defence of the ban on banks’ proprietary trading during testimony on Capitol Hill on Wednesday, saying there was no hard evidence that it had led to more menacing markets.

The so-called Volcker Rule has been a lightning rod for Republican opposition to Dodd-Frank, the landmark package of reforms put in place after the financial crisis. The rule aimed to prevent banks from using depositors’ money to make risky trades for their own account – thus lowering the chance that a bank would get into trouble over a trade gone wrong. But critics have argued that the rule, named after the former Federal Reserve chairman who proposed it, has been bad for companies, investors and the US economy.

During questioning of Ms Yellen by the House Financial Services Committee on Wednesday, Texas Congressman Jeb Hensarling cited a paper released by the Fed shortly before Christmas, in which a staff member argued that the rule had had a “deleterious” impact on liquidity in corporate bonds by forcing banks to cut their trading inventories.

Ms Yellen, the Fed chair, countered that the paper did not represent the views of the board as a whole, describing the evidence as “conflicting.”

“It is difficult to come to a conclusion because by most metrics, liquidity in corporate bond markets still remains very healthy,” she said. Asked by Mr Hensarling, the committee chair, whether the Fed intends to take any action in as a result of the paper, she said no.

Ms Yellen’s appearance in the lower chamber followed a more sedate session in the Senate on Tuesday, in which she made a point-by-point rebuttal of the main arguments used by the White House to push for rolling back of the 2010 Wall Street reform law.

Ms Yellen reiterated her opposition to the idea that Dodd-Frank had damaged the supply of credit to small businesses, citing a recent National Federation of Independent Businesses survey showing just 4 per cent of respondents were unable to get the loans they need.

She also endorsed the Consumer Financial Protection Bureau, a creation of Dodd-Frank which Republicans have accused of stifling the provision of financial services through a heavy-handed and capricious approach to enforcement.

“We know consumer abuses in mortgage lending were an important contributor to the financial crisis and could be a source of financial instability in the future, if we’re not attentive to the potential abuses,” she said.